London, August 02 2006 - East European brewer Baltic Beverages Holding (BBH) posted a 31 percent jump in first-half earnings on Wednesday and raised its forecasts for growth in its key Russian beer market and its group profit margins for 2006.
BBH, whose main asset is a majority shareholding in Russia's biggest brewer Baltika, said its beer volumes rose 6 percent in the first six months as it recovered from exceptionally cold Russian weather earlier this year.
The brewer raised its forecasts for growth in the Russian beer market, which generates nearly three-quarters of BBH's profits, to 5 to 6 percent for 2006 from 3 to 5 percent, and said it expected margins to move towards 21 percent after previously saying they would be around 20 percent for the year.
"We have had the first half and July and we have confidence the market will grow at 5 to 6 percent, with three of the four big months of May, June, July and August behind us," BBH chairman John Nicolson told a results conference call.
BBH is a 50/50 joint venture between Britain's Scottish & Newcastle Plc and Denmark's Carlsberg operating in six eastern European markets -- Russia, Ukraine, Kazakhstan and the three Baltic states.
BBH, which makes nearly a quarter of S&N's profits and a third of Carlsberg's and is a major growth area for both, reported first-half earnings before interest and tax (EBIT) of 199 million euros ($254.8 million) on sales up 18 percent.
S&N shares ended up 0.1 percent at 535 pence, while Carlsberg shares were 3.5 percent ahead at 447 crowns.
"The results show a good development for BBH in the second quarter compared to the first, but this is connected with the positive general market development," said Jyske Bank analyst Rune Moller in Denmark.
Credit Suisse analysts in London said that raising margin guidance and a very healthy second quarter bodes well for the key summer season in BBH's beer markets.
Russia is one of the world's fastest-growing beer markets with overall volumes rising 6 percent in 2005, but BBH volumes dipped 1 percent in the first-quarter due to severe weather. However, they then recovered to show first-half volume growth of 4 percent in an overall beer market up 6 percent.
This meant BBH lost market share down to 35.6 percent in the first-half from 36.3 percent previously, but was well ahead of second-placed InBev at nearly 19 percent and No 3 Heineken NV, which puts its share at 16 percent.
Nicolson said that the loss of market share came in the first quarter as BBH began to integrate its Russian distribution across the 11 times zones of the world's largest country, and then had recovered to reach 36.4 percent in June.
BBH reiterated the integration of its four majority-owned Russian brewers Baltika, Vena, Yarpico and Pikra, was scheduled for completion by end-2006, and will generate cost savings of $60 million to $80 million in its first full operating year.
The company added its president for nine years, Christian Ramm-Schmidt, retires in September, but no replacement has been announced as the group is revising its management structure.
S&N is set to report its first-half figures on Aug. 8 and Carlsberg a day later.